How to Future-Proof Your Payment Technology

Here’s what’s coming around the next corner in payment technology, and what your organization should be doing now to prepare for the future.

From IoT-enabled secure payment technology to retail stores equipped with radio frequency identification (RFID) capabilities to voice technology that delivers personalized financial services, the level of technological advancements on the global payment front is at an all-time high. Driven by changing consumer demands, the ever-evolving regulatory environment, and rapid advancements in technology, this evolution finds solutions providers incorporating artificial intelligence (AI), robots, Open Application Programming Interfaces (APIs), and other innovations into their payment-related products and services. In return, organizations (and their customers) get a more streamlined, transparent, and secure transaction process.

“Currently, the global payments industry is undergoing a paradigm shift with an influx of technology, demographic, and regulatory dynamics. While the customer-facing part of the value chain continues to witness high levels of innovation, service providers are still grappling with back-end infrastructure enhancements,” Capgemini reports in Top 10 Trends in Payments, noting that the adoption of APIs, growth in digital payments, innovation in cross-border payments, and challenges from the entry of alternative service providers are all “impacting the industry in terms of fostering competition, nurturing innovation, and enhancing process and system-related efficiencies.”

5 Trends Shaping the Payments Industry

Consumers’ use of digital payments, which will reach $3.6 trillion in 2018 (up 20% over 2015), is driving its own high level of innovation in the sector. Pointing to increased customer demand for—and adoption of—electronic and mobile devices, contactless payment-enabled devices (i.e., wearables, wallets, mobile devices, and cards)—as a key motivator, Capgemini says that “with the advent of faster and more secure mobile devices, consumers expect far more efficient and faster methods of payments, and especially with the greater number of digital payments options.”

Combined, these forces are creating a “perfect storm” on the payment technology front, where staying in step with the changes and ensuring that customer expectations are met (or exceeded) is a top priority for organizations. Here are five technologies that will help shape the payments industry over the next 1-2 years:

Automatic checkout solutions that replace cash registers and barcode scanners. No one likes standing in line, loading and unloading groceries from a shopping cart, and/or getting held up at the checkout counter. To help alleviate these pain points, Panasonic and Trial Company, Inc., are developing the industry’s first RFID-based walk-though automatic checkout solution. Set up in an experimental “Trial Lab,” in Japan, the solution allows customers to automatically checkout by walking through the checkout lane with the basket containing products with RFID tags. By scanning information of, for example, prepaid cards in advance, the solution automatically scans products and completes payment, thereby significantly shortening the checkout time. This also dramatically reduces the store staff operation while also contributing to labor-savings. Finally, the ability to keep track of the individual products enables dynamic pricing.

More secure, intelligent payment processes thanks to the IoT. According to Gartner, the number of devices connected to the Internet will reach 20.4 billion by 2020 (up from 8.4 billion in 2017). Combined with AI, this growing IoT “will demand increased automation of payments and reporting, live actionable data, and instant resolutions. Perhaps its greatest impact, however, will be in facilitating secure payments, enabling customer verification, and helping banks to explore alternative payment methods, such as tokens or their own cryptocurrencies,” according to Fraedom’s Five disruptive technologies changing the shape of banking. Noting that IoT technologies in the banking sector are used primarily for customer-monitoring (to understand and engage them better), the company says this is just scratching the surface of IoT’s potential in the payments industry. “This is about having a complete understanding of products and services at any point in time and automating their management and payments,” it notes. “Ultimately, IoT is about intelligence.”

An uptick in voice-driven payment and banking applications. Business Insider’s BI Intelligence service predicts that the use of voice payments will nearly quadruple over the next five years to reach 31% of US adults—or 81 million consumers—by 2022. The movement is already well underway: RBC added payments functionality to its app in order to let customers pay bills on their iPhones or iPads via Apple’s voice assistant, Siri. After a user voices the command, the RBC app debits his or her account and sends the payment, which is protected by Touch ID. At USAA, the bank uses Alexa and conversational AI to enhance its customers’ experiences with voice banking. The integration between Alexa and start-up Clinc’s conversational AI platform gives users a more personal experience in a world where customers have come to expect such levels of service. Expect to see more banks and providers experimenting with voice technology over the next 6-12 months. “Although voice technology still has low usage,” Business Insider notes, “it will be the next banking channel to take off.”

Biometrics to enable a more convenient, frictionless transaction. Paying for items using a mobile device has become pretty commonplace, but for most consumers, paying with a selfie, fingerprint, or iris scan still sounds like something out of the latest Mission Impossible movie. That perception is quickly fading; the number of mobile payments authenticated by biometrics via fingerprint and facial recognition is set to exceed $2 billion this year, according to Juniper Research. Pointing to the “Smile to Pay” Alipay application, Mobile Payments Conference says it takes “just a few seconds to recognize and identify a face, then verify payment through a mobile phone.” And with roughly 60% of smartphones now featuring fingerprint sensors, MPC says biometrics is one of many technologies that help enable a more convenient, frictionless user experience. “The trifecta of privacy, convenience, and security,” the group concludes, “may accelerate biometric mobile payments as the next disruptive technology.”

Better operational efficiencies and labor savings with AI and machine learning. As the use of AI proliferates across many different industries, it’s becoming especially relevant for payments companies that want to improve operational efficiency, reduce processing times, eradicate human error, and gain better visibility over users. “The impact of AI is felt strongly across the payments landscape, from changing the way people invest their money to automating the borrowing process; a huge development for those who’ve previously been overlooked as a result of cumbersome challenges and infrastructures,” PayU Latin America’s Jose Vélez writes in How AI and machine learning are shaping the payments landscape. Kreditech, for example, is leveraging data science and technology (namely, machine learning and AI) to offer companies greater understanding about a customer’s credit rating. It uses machine learning and AI to process alternative data that fuels more sophisticated scoring technology to replace traditional credit models. “From cutting costs, automating time-consuming operations, and shortening the approval process,” Vélez adds, “both AI and machine learning will continue to pave the way for the payments industry.”

As the payments industry continues to evolve, and companies across most sectors strive to create a safe, secure, streamlined payment process for their customers, expect to see even more innovation infused into the way organizations manage their financial transactions. By keeping an ear to the ground and maintaining a customer-first approach, companies can position themselves for success now, and well into the future.